santander in portugal returns net income of · email: [email protected]...

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Corporate Communications and Marketing

Rua da Mesquita 6, 1070-238 Lisbon

Tel: 210527526/7596

Email: [email protected]

JANUARY – MARCH 2020 RESULTS

Santander in Portugal returns net income of

€118.9 million (-13.4% yoy)

“The first quarter of 2020 results already showed a slight impact associated with the Covid-19 pandemic.

But our liquidity and solvency remained robust. We recorded new growth of the customer base and both

deposits and loans and advances also performed well. We were recognized externally once again, and

received several awards such as the Best Bank in Portugal and the Banking Brand with Best Reputation.

We were in the front line with the definition of concrete measures to support our employees, customers

and suppliers, with a view to minimizing the effects of the pandemic. We strongly supported the

Portuguese economy. Outside the scope of Covid-19, we granted more than €500 million of loans and

advances in March, and, in the Capitalizar 2018 – Covid-19 line, we were leaders in the number of

transaction placed, providing €120 million, with a market share of 31%.

We strengthened our impact on society. Since the crisis began, we tripled the amount of our social

responsibility budget, in donations to institutions that support those most in need. By early May, we had

provided €3.2 million to various initiatives – including universities – in order to help fight Covid-19.

The coming months of 2020 will be quite challenging, but we are ready to continue to support the

economy, safeguarding always the savings of the Portuguese who entrust their money to us, and

protecting our employees.

We reiterate our spirit of permanent mission to support the households and businesses of Portugal".

Pedro Castro e Almeida, Chief Executive Officer of Banco Santander Portugal

Lisbon, May 14, 2020

Key highlights of the first quarter

At the end of the first quarter of 2020 the net income of Santander Totta, SGPS, amounted to €118.9

million.

With the declaration of the Covid-19 pandemic caused by the SARS-CoV-2 virus, the Bank has defined as

its first priority the support for people, particularly for employees, customers and suppliers, in order to

mitigate the effects of the pandemic. Santander in Portugal not only implemented moratoriums on

mortgage and corporate loans, in line with the decisions taken by the Portuguese government, but also

adopted an additional set of extraordinary and temporary measures, with emphasis on:

- Maintenance of all contracted credit limits, resulting in the availability of an additional €4 billion of

credit, with no alteration of the spread or of other associated commissions;

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- Possibility of individual and corporate customers signing up for a moratorium on principal and

interest on all loans, which customers can access through NetBanco, with an approval rate in excess

of 90%;

- For all retailers, suspension of collection of the monthly POS charge and exemption from the

application of a minimum amount on transactions carried out and support in the use of "contactless"

transactions, also suspending the collection of all commissions of the MB Way service via the POS;

- For all individual customers, Santander encourages the use of its digital app or NetBanco platforms,

making contactless payments convenient and secure and, to this end, all payments made via the

digital channels are exempt.

Excluding loans granted under the Covid-19 lines, Santander in Portugal extended credit to the economy

by more than €500 million in March.

Within the scope of credit lines guaranteed by the State, aimed at mitigating the effects of the pandemic,

the Bank received over 13,000 requests in the amount of more than €2.2 billion.

With regard to the Capitalizar 2018 – Covid-19 line, which is already closed, Santander in Portugal was

leading in the number of transactions placed (415), with a market share of 36% of the companies

supported. In terms of amount, the Bank provides €120 million, with a market share of 31%.

Customers’ resources totalled €41.8 billion, a yoy growth of 1.5% compared to the same period last

year, the result of the 2.3% increase of deposits. Deposits stabilized during the quarter.

Loans to customers amounted to €41.0 billion, an increase of 1.3% compared to March 2019. During the

quarter, the loan portfolio grew by 2.5%, especially in the corporate segment.

The market shares of new loans to companies and mortgage loans amounted to 19.1% and 23.4%

respectively, up to the end of March.

The number of loyal customers and the number of digital customers returned annual growths of 2.9%

and 5.4% respectively, in yoy terms.

Operating income was practically stable yoy, in an adverse context of low interest rates, which affected

net interest income, and of the impact of the pandemic on commissions.

The cost-to-income ratio stood at 41.5%, an improvement of 1.5pp compared to March 2019, the result

of the growth of operating income and of the reduction of operating costs (3.7%).

The CET 1 ratio stood at 15.8% (fully implemented), a yoy increase of 1.2pp.

During the first quarter of 2019, Santander was distinguished as the "Best Bank in Portugal 2020" by

the North American Global Finance magazine. It was also distinguished as the "Most Reputable Banking

Brand in Portugal", in the Global RepScore Pulse 2020 ranking, prepared by consultant OnStrategy.

In the Companies area, Euromoney distinguished Santander as the "Best Trade Finance Bank" in Portugal,

coming first in the "Market Leader" and "Best Service” categories. At the beginning of the year the

publication had already highlighted Santander’s Private Banking as the "Best Private Banking Services

Overall in Portugal 2020".

As employer, Santander was considered the "Best Bank to Work For in Portugal" for the fourth

consecutive time and, simultaneously, it was in the Top 3 of the Best Large Companies" (over 1,000

employees) to work for in the country by the Great Place to Work Institute.


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Within the context of the Covid-19 pandemic, the Bank’s support to society amounts to €3.2 million

euros, an amount that was allocated to the purchase of ventilators, hospital supplies and protection

equipment, to the solidarity campaigns related to the Food Bank, to the Red Cross and to other

associations in the field, including Universities and Polytechnics, providing financial and technological

support to students in a more vulnerable economic situation, and to projects in the health sector that

can directly impact on the solution of the pandemic.

The Santander Solidarity Fund was created, through which employees helped to ensure access to food

by vulnerable people and households, in which the Bank doubled the amount. In total, €80,000 were

raised, which are already being made available to charitable organisations currently in the field.

For the community as a whole, in Portugal Santander launched the "Overcome Together” website, a

space accessible to any person or company, whether or not a customer of the Bank, containing

information and content in order to help in overcoming the situation created by Covid-19.

Santander in Portugal has the sector’s best ratings. The Bank’s current long-term debt rating notations

in comparison with the levels of the Portuguese Republic are as follows: Fitch – BBB+ (Portugal – BBB);

Moody’s – Baa3 (Portugal – Baa3); S&P – BBB (Portugal – BBB); and DBRS – A (Portugal – BBB high).


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Key Indicators

Balance Sheet (million euros) Mar-20 Mar-19 Var.

Net assets 56,134 56,618 -0.9%

Total Gross Loans 40,986 40,476 +1.3%

Resources 41,754 41,125 +1.5%

Net interest income (without dividends) 202.0 215.6 -6.3%

Net comissions 96.6 95.6 +0.9%

Operating income 354.5 355.1 -0.2%

Total operating expenses (147.0) (152.6) -3.7%

Net operating income 207.5 202.5 +2.5%

Income before taxes and MI 167.2 196.2 -14.8%

Consolidated net income 118.9 137.3 -13.4%

RATIOS (million euros) Mar-20 Mar-19 Var.

ROE 11.2% 13.4% -2.2 p.p.

Efficiency ratio (incl. depreciation) 41.5% 43.0% -1.5 p.p.

CET 1 ratio fully implemented 15.8% 14.7% +1.1 p.p.

Non-Performing Exposure ratio(1) 3.3% 4.0% -0.7 p.p.

Non-Performing Exposure coverage ratio 55.9% 51.1% +4.9 p.p.

Cost of Credit 0.20% -0.15% +0.35 p.p.

OTHER DATA (million euros) Mar-20 Mar-19 Var.

Number of employees in Portugal 6,169 6,391 -222

Total Branches and Corporate Centers in Portugal 501 524 -23

RATING (long term debt)

FitchRatings BBB+

Moody's Baa3

Standard & Poor's BBB

DBRS A

(1) According to EBA criteria


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External recognition

During the first quarter of 2020, Santander was distinguished as the "Best Bank in Portugal 2020" by the North

American Global Finance magazine. It was also distinguished as the "Most Reputable Banking Brand in

Portugal", in the Global RepScore Pulse 2020 ranking prepared by consultant OnStrategy.

In the Companies area, Euromoney distinguished Santander as the "Best Trade Finance Bank" in Portugal,

coming first in the "Market Leader" and "Best Service” categories. At the beginning of the year the publication

had already highlighted Santander’s Private Banking as the "Best Private Banking Services Overall in Portugal

2020".

As employer, Santander was considered the "Best Bank to Work For in Portugal" for the fourth consecutive time

and, simultaneously, in the Top 3 of the Best Large Companies" (over 1,000 employees) to work for in the

country by the Great Place to Work Institute.

Results

At the end of March 2020, Santander Totta, SGPS (referred to as “Bank” or “Santander in Portugal” in this press

release) returned a consolidated net income of €118.9 million, a year-on-year reduction of 13.4%.

Operating income was practically stable compared to March 2019 (down 0.2%), while operating expenses

decreased 3.7%, thus contributing to the improvement of net operating income (up 2.5%), as well of as the

cost-to-income ratio (down 1.5pp).

Net interest income amounted to €202.0 million, a decrease of 6.3% in year-on-year terms, largely justified by

the economic and competitive framework, marked by great competitive pressure on prices in a framework of

low interest rates and moderate demand for credit.

Net commissions, amounting to €96.6 million, grew by 0.9% compared to March 2019, the month of March

having already been affected by the effects of the pandemic and by the suspension of a set of commissions

within the scope of the measures to support businesses and households. Emphasis is given to the favourable

evolution of account-management fees, as well as to the funds and insurance marketed by the Bank.

Other banking income amounted to -€16.7 million, largely reflecting the contributions to the Single and

National Resolution Funds. The results of the insurance activity, in the amount of €4.0 million, decreased by

38.6%, resulting from the transfer of a portfolio of the former Eurovida to Aegon Santander Seguros. The

results of financial transactions amounted to €65.9 million, including also the results of the management of

the public-debt portfolios.

Total operating expenses totalled €147.0 million in the first quarter, an annual decrease of 3.7%, the result of

the 2.9% reduction of personnel expenses and the 6.8% reduction of general expenses. Depreciation grew by

4.6% in yoy terms.

The impairment dynamics, when compared to the same period last year, reflects the past-due loan recoveries

and the gains on sales of non-performing loans during the first quarter of 2019.

The cost-to-income ratio evolved favourably, down at 41.5% at the end of March 2020, benefiting from the

stabilization of revenue and the reduction of operating costs.

Income before tax and minority interests amounted to €167.2 million, down 14.8% yoy.


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Balance Sheet and Business

At the end of March 2020, the loan portfolio (gross) amounted to €41.0 billion, an increase of 1.3% over the

same period of 2019. This growth was especially noticeable in the loan to individuals portfolio, which grew

1.6%, in line with the increase of the shares in new loan production.

Mortgage loans amounted to €19.8 billion, an increase of 1.4% over the same period last year, and consumer

credit amounted to €1.7 billion, a growth of 6.0% compared to March 2019. Compared to the preceding

quarter, the changes amounted to 0.9% and -0.1%, respectively.

Loans to companies amounted to €18.0 billion at the end of March 2020. Despite the 1.3% yoy reduction,

compared to the end of 2019, loans to companies portfolio grew by 1.7%.

The Non-Performing Exposure (NPE) ratio, calculated in accordance with the EBA criterion, stood at 3.3%, in

March 2020, a decrease of 0.7pp compared to March 2019, the respective coverage standing at 55.9%.

Customers’ resources amounted to €41.8 billion, a year-on-year increase of 1.5% compared to the same period

last year, reflecting the positive contribution of the evolution of deposits (up 2.3% to €35.0 billion). The

investment funds marketed stabilized compared to the amount last time, while insurance and other resources

decreased by 3.8% compared to March 2019.

Credit (million euros) Mar-20 Mar-19 Var.

Credit (gross) 40,986 40,476 +1.3%

from which

Credit to Individuals 21,955 21,618 +1.6%

Mortgage 19,822 19,555 +1.4%

Consumer credit 1,705 1,608 +6.0%

Credit to Companies 17,961 18,192 -1.3%

Resources (million euros) Mar-20 Mar-19 Var.

Customers' Resources 41,754 41,125 +1.5%

On-balance sheet resources 35,007 34,221 +2.3%

Deposits 35,007 34,221 +2.3%

Off-balance sheet resources 6,747 6,904 -2.3%

Investment funds managed or marketed by the Bank 2,700 2,699 +0.1%

Insurance and other resources 4,047 4,205 -3.8%


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Liquidity and Solvency

Santander in Portugal’s policy is to maximise the buffer available to cope with any unexpected events having

an impact on the Bank’s liquidity situation. During the first quarter of 2020, the Bank continued to reinforce its

solid liquidity position, with a reduction of the (net) exposure to the Eurosystem to zero, and with an increase

of €0.3 billion of the liquidity buffer.

The LCR (Liquidity Coverage Ratio), calculated in accordance with the CRD IV rules, stood at 140%, thus

complying with the regulatory requirements on a fully-implemented basis.

The Common Equity Tier 1 (CET 1), calculated in accordance with the CRR/CDR IV rules, stood at 15.8% (fully

implemented) and at 15.9% (phased-in) in March 2020, reflecting the capacity for organic generation of

capital, as well as the management of risk-weighted assets. The Bank maintains fairly high capitalization

levels, representing a very comfortable margin over and above the minimum requirements set by the ECB

under the SREP (in 2020, CET1 of 9.0%, Tier 1 of 10.5% and Total of 12.5%, in full).

Commercial Banking

Individuals and Businesses

In the first quarter of 2020, and within the current pandemic context, the Bank had to quickly reset its priorities,

strengthening its support to households, businesses and companies and society in general.

Quickly and in an agile manner, the Bank provided a moratorium on mortgage loans and personal loans,

complementing the Government’s moratorium (in accordance with Decree-Law 10-J/2020 of March 26), for

the purpose of reducing the charges on these loans for customers whose income was negatively impacted by

the pandemic. Use of this solution can be entirely enacted by digital means up until June 30, 2020.

Additionally, the Bank put in place a set of measures to support households:

1. Simplifying the use of digital channels and access to banking transactions without leaving home, with

complete confidentiality, ease and security. Examples of this measure are the exemption from payment of

commissions on domestic transfers through the Bank’s digital channels, including sending money by MB

Way until April 30, free-of-charge replacement of cards without contactless technology by cards having this

technology, and exemption from the commission on the provision of new credit or debit cards up until

September 30;

2. Ensuring access to banking services, keeping open the vast majority of the bank branches, though with

shorter opening hours and compliance with the safety rules to ensure the safety of the Bank’s employees

and customers;

Capital (fully implemented) (million euros) Mar-20 Mar-19

Common Equity Tier 1 2,933 2,929

Tier 1 3,533 3,529

Total Capital 3,607 3,572

Risk Weighted Assets (RWA) 18,568 19,925

CET 1 ratio 15.8% 14.7%

Tier 1 ratio 19.0% 17.7%

Total Capital Ratio 19.4% 17.9%


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3. Supporting customers over the age of 65, who are not digital, with the creation of the AQUI E AGORA

programme. This programme is intended to be even closer to the customers who have greater difficulty in

the use of the digital channels, identifying their needs in this connection, supporting adherence to channels,

and streamlining the day-to-day banking operations without a need to visit the branches.

With regard to the customer base there was an increase of 3,700 loyal customers, with a major contribution by

customers of the Select segment. With regard to the number of digital customers, users of the Santander App

and/or NetBanco, there was an increase 20,000 customers in the first quarter to 797,000, or 45% of the main

bank customer base. As a result of the context and of the solutions and measures that the Bank has been

developing, transactions via the digital channels continue to increase, with greater emphasis on payments

using the Santander App.

Also to be underscored is the positive evolution of the Mundo 123 customers (customers having an account, a

card and protection insurance). Mundo 123 is a multi-product solution directed at individual customers that,

besides the advantages of the 123 account, can provide an additional set of benefits, via cash-back, in the

Mundo 123 card account.

Also with regard to the activity of the Businesses area, the Bank immediately took measures to alleviate the

effects of Covid-19 pandemic on its customers, in addition to the moratorium and to the credit lines provided

with a Government guarantee, overhauling customer service and contacts, simplifying processes with a major

focus on the digital. This set of extraordinary and temporary measures for businesses includes suspension of

the collection of the monthly POS charge; exemption from application of the minimum charge on transactions,

exemption from collection of the fixed charge per transaction on the POS packages (where applicable) and

exemption from collection of the merchant’s service charge on MB WAY transactions carried out via the POS.

At the end of March, the turnover of the Businesses segment increased by €223 million compared to last time,

an increase of 2.6%.

Companies and Institutionals

In 2020 Santander in Portugal maintains the focus on supporting the Business sector through a comprehensive

financial offer and a non-financial offer that aims to strengthen the qualifications of companies, rendering the

relationship with customers increasingly global and ever closer.

The Santander Empresas Non-Financial Solutions are a differentiating offering that is outstanding in the

financial market, at the disposal of companies and entrepreneurs, allowing the ongoing training of their staff

and employees, support to internationalisation and strengthening presence in the digital area. They also

promote among young people their employability through an internship scholarship programme.

Under the Internship Scholarship programme 81 internships were awarded during the first quarter of 2020, in

a business environment, making this programme a true platform for access to the employment market for

final-year university students, about 40% of the youths involved in the programme having maintained their

connection with the company with which they carried out their internship, reflecting their fitness to meet the

needs of the companies.

The offer of online training, in partnership with two certified entities of renown in the market, allows free access

to more than 15 courses in five different areas, provided a total of 17 degrees during the first three months of

2020.


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The positioning and focus the Bank's support for companies is also to be seen in the number of transactions

and amounts falling within the scope of the Mutual Guarantee Societies, to support investment projects or

financing cash, in the most varied economic sectors.

Through the IFRRU 2020 line, in which Santander manages the market’s biggest line, support has been

maintained for the development of several urban rehabilitation projects promoted by companies and

individuals.

Support for customer internationalization is a major point, and for the purpose it has specific tools to support

international business, such as the Santander Trade portal and the International Desk.

The Bank continues to support the cash management of companies through factoring and confirming products

for both the largest Portuguese companies and also for small and medium-sized enterprises, accompanying

customers with solutions tailored to their business and to support the opening of new markets in a context of

increasingly demanding requests by companies, providing via the NetBanco Empresas platform a generalist

offering covering the entire range of sub-products existing in the market.

With regard to Institutional Banking, Santander maintained its commitment to the customers of this segment,

both with regard to public entities, maintaining a strong presence in the Azores and Madeira Regions and with

the Municipalities, as well with private entities, with a special focus on Religious Institutions and on the Social

Economy institutions, designing tailored solutions for these institutions in order to meet their needs.

At the end of the first quarter, the turnover in the institutional customer segment performed quite well,

especially in terms of resources, with a growth of 26.8% since the beginning of the year.

As part of the contingency measures to deal with the Covid-19 pandemic, Santander went ahead with the

extension of the limits of customers of the Business, Companies and CIB segment until July 1, 2020; as well as

the suspension, of an extraordinary nature, of the change of the pricing of Companies’ accounts until April 30,

2020.

In conjunction with public entities involved, the Bank provided its customers with the COVID-19 lines, created

to support their cash requirements with an increase of the working capital of the SMEs. Until May 7, the Bank

received over 13,000 requests, amounting to more than €2.2 billion.

With regard to the 2018 Capitalizar – Covid-19 Line, now closed, the Bank was at the forefront in the number

of transactions placed (415), with a market share of 36% of the companies supported. In terms of amount, the

Bank provides €120 million, with a market share of 31%.

Investment Funds and Insurance marketed

As mentioned earlier, the first quarter of 2020 was marked by the 19-Covid pandemic, which caused a

significant economic slowdown impacting on the financial markets, on subjecting the world's major economies

to containment policies. Within this context, Santander Asset Management – SGOIC, SA (SAM) sought to

manage its mutual funds actively, with the goal of minimizing losses for its participants.

It is noteworthy that during this period, SAM came to be owned by Santander Asset Management UK Holdings

Limited, which, at a general meeting, approved the merger by incorporation of POPULAR Gestão de Ativos –

SGOIC, SA, into SAM – SGOIC, SA, with effect as from March 31, 2020. SAM ended the quarter with a share of

18.5% compared to 17.5% last time (on a comparable basis).

Real-estate investment funds totalled about €422 million at the end of March.


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In the Financial Insurance area the focus continued to be on active management of the open financial insurance

products with different investment profiles for medium- to long-term investment, ending the period with

assets amounting to €582 million.

In order to meet customer needs, retirement solutions continued to focus mainly on commercial activity, with

an increase of about 7,000 customers and a total volume of net subscriptions of €31.5 million.

The Bank continued to foster a service attitude, with an intensive plan of after-sales initiatives aimed at ongoing

improvement of service quality and customer experience.

The business of the protection insurance area was focused on supporting customers from a total protection

perspective, with an increase of the team of advisors. A commercial offering campaign was launched with

preferential conditions, and the protection insurance digital transformation strategy continued, coming to

provide 100% of the offering for individual customers via the digital channels. Exceptional measures were also

implemented within the scope of Covid-19, involving the offer of free-of-charge online medical services

through the SafeCare Health App, eliminating the pandemic exclusion from health insurance, life insurance and

salary protection plan.

Corporate and Investment Banking

The first quarter of 2020 was marked by intense activity in the Corporate & Investment Banking area, in a

framework of maintenance of negative interest rates and high pressure on spreads. In March, with the onset of

the Covid-19 pandemic, the strengthening of the proximity and commitment to customers was essential. Thus,

processes were adapted, ensuring for customers a fast and appropriate response to their needs, besides the

focus on the digital channels, with emphasis on the digital foreign-exchange contracting platform (via

NetBanco Empresas), allowing, in this framework of containment, adequate response to the needs of the users.

We would underscore the strengthening of financial advisory operations, especially (1) exclusive advice to

Glenmont Partners in the sale to Finerge of four solar parks in Portugal. The largest transaction of solar assets

undertaken in Portugal and (2) advice to Cellnex on the acquisition of OMTEL.

In the Global Debt Financing area, the first quarter of 2020 was marked by the participation of Santander, as

Bookrunner, in the issue of a Hybrid Green Bond for EDP, with a maturity of 60 years, for an amount of €750

million. During the quarter several significant financing transactions were also completed in a wide range of

sectors, with emphasis on several loans and refinancing in the real-estate sector, including shopping centres

and property development for student residences.

In the Corporate Finance area, attention is drawn to the successful completion of financial advisory operations

in the telecommunications, shopping centres and energy sectors. Several other advisory processes are

underway involving transactions to be concluded in the coming months.

In Treasury, the Corporate and Commercial Banking area maintained the growth trend seen since 2018, based

on the finalisation of interest-rate risk hedging operations and also by enlargement of the offer of foreign-

exchange operations contracting alternatives.

During the first quarter of 2020 there was a sharp growth of the volume of loans and of the number of fixed-

rate transactions formalized. The fact that the interest rates in the euro area remain in negative territory

contributed to the trend of increased demand for risk-management solutions. In March, the pandemic led to a

substantial increase of uncertainty, which usually contributes to greater demand for risk-mitigation solutions.


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In the foreign exchange area, the pandemic has led to a natural downturn of the turnover of domestic

customers, fundamentally with Asian countries, and there was a slight decrease of the volume and number of

foreign-exchange transactions, in contrast with the expectations of consolidation of foreign-exchange

transactions of the early months.

In the Cash Equity area, the beginning of the year with moderate gains gave way to high levels of uncertainty

and volatility, with the worsening of the pandemic. As investors tried to anticipate the real impact of the

shutdown of the global economy, the fall of the indices was sudden and sharp, as reflected by the devaluations

of over 35% of the S&P 500 (US) and Stoxx 600 (EU) indices in March.

Despite this dramatic correction, there was a sharp increase of trading volumes, which in March almost doubled

the average monthly volumes of the previous year. The CMVM data for the first quarter of 2020 revealed that

the volumes of orders on shares received by financial institutions in Portugal grew by approximately 80% year

on year, totalling about €5 billion euros. Santander contributed with a growth of 152.5%, to €418 million,

representing a market share of 8.4% in the first quarter. In the online business, the market grew 178% to

€1.901 billion, Santander having contributed €259 million, an increase of 205% over the same period of 2019

and a share of 7.65% in the first quarter of 2020 (6.64% in the same period last year)1.

Responsible Banking

The beginning of 2020 was unexpectedly marked by the calamity caused by the Covid-19 pandemic, which

caused an emergency in public health and in the Portuguese and international economy.

In this connection, support to the community came to be primarily centred on two vectors: (i) initiatives to

provide professionals and health facilities, as well as social organizations, with the necessary equipment to

combat Covid-19 (masks, personal protective equipment, disinfectant, ventilators, screening tests for Covid-

19); and (ii) assisting people in a situation of particular vulnerability and socio-economic distress as a result of

the pandemic, with food products.

The following initiatives are highlighted:

In Portugal, the Bank has already provided more than €600,000 for the purchase of hospital supplies, in

order to meet the needs of hospitals to acquire ventilators, analysis systems and personal protective

equipment;

Launch of the "Ajude-nos a Ajudar” Solidarity Fund – Internal fund through which employees can actively

contribute to ensure access to food by vulnerable people and households, with their donations (the Bank

puts up twice the amount). In total, €80,000 have already been raised, which are already being made

available to charitable organisations currently in the field.

Financial partner of the #Nunca Desistir initiative, making a donation of €50,000 to be divided between the

two participating entities (Portuguese Red Cross and the Emergency Food Network);

Association with the European "Global Response to Covid-19" initiative – donors' conference, with a view to

accelerating the development and production of and equitable access to vaccines, diagnoses and

treatments, contributing with a €500,000 donation.

To support customers over the age of 65, unfamiliar with the adherence to and the operation of the digital

channels, the Bank launched the "Aqui e Agora” service, through which all commercial managers and other

1 Source: CMVM, Monthly order reception indicators, March 2020


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employees will help these customers in particular, in all procedures for registration with and operation of

the digital channels;

With regard to the Universities segment, Santander and the Higher Education Institutions in Portugal

channelled about €2 million to initiatives to support Portuguese students and households meeting the

economic, social and public health needs resulting from the Covid-19. The University of Évora created a

solidarity fund of €200,000 and the University of Trás-os-Montes installed a Temporary Shelter to

accommodate the elderly from care-homes affected by the pandemic. In total, the building can receive 150

people. The Setúbal Polytechnic Institute will provide equipment to perform tests, produce protective

masks and alcohol gel;

For the community as a whole, in Portugal Santander launched the "Overcome Together” website, a website

accessible to any person or company, whether or not a customer of the Bank, containing information and

content in order to help in overcoming the situation created by Covid-19.

Business Framework

The world changed dramatically in the early months of 2020 as the Covid-19 extended to all continents.

The first outbreak, which emerged in the region of Wuhan, China, quickly extended to other regions and

continents. The second focus was located in Europe, with the epicentre in Italy, which quickly spread to other

countries, especially Spain, France, Germany and the United Kingdom. All countries have reacted by

implementing very stringent containment measures since March 2020. The lower rate of transmission and

pressure on health systems has allowed some of the restrictions to be lifted, depending on the evolution of the

transmission and recovery rate (the R0 parameter). Currently, the North and South American continents are the

main epicentres of the disease, in particular the US and Brazil.

With over 50% of the world GDP in lockdown the International Monetary Fund expects the global economy to

contract at least 3% in 2020, with the developed economies falling 6.1% and the emerging economies falling

1.1%, considering a pandemic context that will last throughout 2020. It can be expected that the recovery will

be almost total in 2021, although at rates that differ between the developed and emerging economies, while

the risks of a second wave are still high and, consequently, in the worst scenario, the economy could contract

again.

Faced with an unprecedented global crisis, governments, central banks and other institutions have sought to

develop and implement measures to support the economy, transferring liquidity to businesses and households,

at a time when economic activity – movement of people and goods – is limited to what is essential.

In the euro zone, the ECB has increased liquidity to member states through the creation of new monetary policy

mechanisms, the PELTROs – Pandemic Emergency Longer-term Refinancing Operations – starting in May 2020

and up to July/September 2021, a fixed refinancing rate and 25bp below the average of the rates recorded in

the MRO - Main Refinancing Operation. Additionally, the refinancing conditions of the TLTRO III were revised,

with refinancing rates to be reduced by 50 basis points compared to the average of the MRO rates, for

transactions carried out between June 2020 and June 2021. At the end of March, the PEPP – Pandemic

Emergency Purchase Programme – came into effect in the amount of €750 billion, which came to leverage the

monetary transmission response of the APP – asset purchase programme – currently in force.

During the first quarter of 2020, GDP in the euro zone contracted 3.8% in quarterly terms, the result of the

lockdown measures implemented. In this sense, the scenario of economic recession foreseen by the ECB for

the Euro zone is set to range between -5% and -12% in 2020, with expectations of a gradual recovery and


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normalization of the economic conditions in subsequent years. The intensity of the downturn will be dependent

on the duration and success of the containment measures and on the way in which the productive capacity and

demand have been permanently affected, which, in turn, will depend on the effectiveness and success of the

measures to support households and businesses in each member state.

In Portugal, economic activity in the first quarter of 2020 will probably reflect the first shock waves of the

pandemic, with the economy partially shut down since mid-March. Thus, GDP is expected to have contracted

by at least 2% QoQ, resulting in a yoy contraction of around 1%. Investment and private consumption are set

to be the components most affected by the containment measures, with QoQ falls that may be greater than

3.5% and 10%, respectively.

The sharp drop of domestic demand can be partially offset by net exports, in that until February exports were

accelerating and imports were slowing, resulting in a net positive contribution to growth.

Conditions in the labour market show signs of deterioration, with companies falling back on the simplified

layoff system in order to avoid mass destruction of jobs, despite a salary reduction of about 1/3. A rise of the

unemployment rate can be expected in 2020, the size of which will depend on the effectiveness and success

of the government’s measures. In February, the unemployment rate stood at 6.4%.

The inevitable drop of household income and the perception of risk associated with a potential second wave of

the outbreak, within the context of the absence of a vaccine and/or treatment until at least the first quarter of

2021, is set to condition the consumption and investment prospects, resulting in a recovery that will be slow

and gradual.

The prosperity and competitiveness gains recorded in the Portuguese economy in recent years have allowed a

reduction of the level of private and public indebtedness, through a positive and recurrent net worth since 2013,

due to the increase of the global savings rate from 14% to 19 % in 2019.

The budget balance in 2019 recorded a positive overall balance of 0.2% of GDP, with a primary surplus of

almost 4% of GDP. The tax burden was nearly 36% of GDP, and debt servicing weighs about 9% of tax revenues.

The public debt to GDP ratio was 117% in 2019.

The current pandemic crisis increased the macroeconomic risks, raising the perception of the sovereign risk.

The 10-year sovereign debt was priced at 0.84%, a spread of 144 basis points against Germany (as of May 2,

2020). The risk notation of the Republic assigned by the S&P, Fitch and Moody's agencies is BBB (stables, revised

from positive), BBB (negative, revised from stable) and Baa3 (positive), respectively. The DBRS agency

maintains the BBB – high (stable) rating.


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Balance Sheet (million euros) Mar-20 Mar-19 Var.

Cash, cash balances at central banks and other demand deposits 4,092 3,296 +24.2%

Financial assets held for trading, at fair value through profit or

loss, and at fair value through other comprehensive income12,258 10,900 +12.5%

Of which:

Loans to Customers 2,981 0 -

Financial assets at amortised cost 38,063 40,297 -5.5%

Of which:

Loans to Customers 37,072 39,419 -6.0%

Investments in subsidiaries, joint ventures and associates 114 115 -0.7%

Tangible assets 627 676 -7.3%

Intangible assets 35 30 +18.6%

Tax assets 544 685 -20.6%

Non-current assets held for sale 46 68 -31.8%

Other assets 354 552 -35.9%

Total Assets 56,134 56,618 -0.9%

Financial liabilities held for trading 1,094 1,206 -9.3%

Other financial liabilities mandatory at fair value through profit or loss 3,245 3,401 -4.6%

Financial liabilities at amortised cost 44,811 45,424 -1.3%

Resources from Central Banks and Credit Institutions 6,158 6,632 -7.1%

Customer deposits 35,007 34,221 +2.3%

Debt securities issued 3,407 4,308 -20.9%

Of which: subordinated debt 8 8 +0.0%

Other financial liabilities 239 264 -9.2%

Provisions 239 288 -17.0%

Technical provisions 718 751 -4.4%

Tax liabilities 463 362 +28.1%

Other liabilities 1,077 779 +38.2%

Total Liabilities 51,648 52,211 -1.1%

Share capital atributtable to ST SGPS shareholders 4,484 4,405 +1.8%

Non controlling interests 2 2 -12.8%

Total Shareholders' Equity 4,486 4,407 +1.8%

Total Shareholders' Equity and Total Liabilities 56,134 56,618 -0.9%

Santander Totta, SGPS


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Proforma Income Statement* (million euros) Mar-20 Mar-19 Var.

Net interest income (without dividends) 202.0 215.6 -6.3%

Dividends from equity instruments 0.0 0.0 -

Net interest income 202.0 215.6 -6.3%

Results from Associates 2.7 2.5 +7.9%

Net comissions 96.6 95.6 +0.9%

Other banking income -16.7 -15.3 +8.7%

Insurance activity 4.0 6.6 -38.6%

Gain/loss on financial transactions 65.9 50.0 +31.6%

Operating income 354.5 355.1 -0.2%

Total operating expenses (147.0) (152.6) -3.7%

Personnel expenses (84.8) (87.3) -2.9%

General expenses (49.4) (53.0) -6.8%

Depreciation (12.8) (12.3) +4.6%

Net operating income 207.5 202.5 +2.5%

Impairment (19.7) 15.1 -

Net provisions and other (20.6) (21.5) -4.3%

Income before taxes and MI 167.2 196.2 -14.8%

Taxes (48.2) (58.8) -18.0%

Minority interests (0.0) (0.1) -8.4%

Consolidated net income 118.9 137.3 -13.4%

(*) Not audited


Ratios Mar-20 Mar-19 Var.

Profitability

Income before taxes and MI/Average net assets 1.2% 1.4% -0.2 p.p.

Operating income/Average net assets 2.5% 2.6% -0.1 p.p.

Income before taxes and MI/Average equity 15.5% 19.1% -3.6 p.p.

Efficiency

Total operating expenses/Operating income 41.5% 43.0% -1.5 p.p.

Personnel expenses/Operating income 23.9% 24.6% -0.7 p.p.

Transformation

Credit (net)/Deposits 114.7% 115.5% -0.8 p.p.


In accordance with the definition contained in instructions 16/2004 of the Bank of Portugal with the changes in instruction 6/2018


santander in portugal returns net income of · email: [email protected]...

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